Global Recession: Expectations vs Reality 2020
The term Recession is now we heard most in daily newspapers and news media. Which reflects the economic condition of the business in our surroundings. The country’s economic ups and downs are reflected from its G.D.P. (Gross Domestic Product).
Recession & Negative G.D.P. Growth
G.D.P is the monetary value of all finished goods and services made within-country during every Quarter of the financial year. G.D.P gives an economic view of the country’s G.D.P. It is calculated by Income, production, and expenditure of the country. If two or more quarters of financial year’s growth comes in negative then a country is in a slowdown.
When a country facing slowdown it means business, sales, and revenue of the country are decreases. Which hampered the growth of the country. In a recession period, there is a dramatic fall in demand for products and decreases the sales of the industries.
8 Vital Factors that affect the economic slowdown of the country.
- Due to a shortage of liquidity– Banks reduce issue loans to the industries which raise the shortfall of liquidity in the physical market and financial crisis arise.
- A rise in interest rates – Continue Rise in Interest rates which increase the borrowing cost of industries and vice versa affect the demand.
- Fall in asset prices – hammering on income affects the spending and negative wealth leads to less expenditure.
- Real wages decrease – Increase in inflation affect the fall in real wage or it affects the promotion or enhancement process in the industries.
- Fall in consumer confidence– Fall in consumer confidence to expense due to the effect on wealth creation is also a key reason.
- Appreciation in the exchange rate – Increase in exchange rates or currency prices increases due to Inflation effects exports less competitive.
- Fiscal ascertained – Due to inflation increase and Current account deficit in government budget government cuts spending which causes recession also.
- Global Trade war – Global Trade war comes in force when the country thinks conservative on to tackle trade deficit and wants to increase export over import which affects Global economic turndown.
7 Reasons affect Global economic turmoil and recession
- Covid-19 – Nowadays an unknown enemy is surrounding us which disrupts trade, manufacturing, travel, and business.
- The trade war between the US and China leading to lower export. And demolish the trade relationship between the two Giants countries. They are making there hold in the global economy. While importantly, discouraging business investment due to uncertainty.
- No-deal Brexit in the UK leads to major disruption and a fall in trading between the UK and EU would push the EU into recession.
- Fall in house prices in America asset prices have recovered since last crash in 2008, Falling house prices have a major effect on consumer wealth and spending
- Austerity in Germany has caused a squeeze in aggregate demand.
- Weak productivity growth – Due to inflation its be costly to drive the industries smoothly with Full staff capacity and its effect growth in production and makes the scenario worst.
- Limited room for monetary/fiscal policy.- due to inflation and current account deficit and make the proper stability and cash and currency central banks squeeze the liquidity from the market which makes limited room in monetary and fiscal policy.
Recession hits India
India is a big consumer market for the rest of the world. India’s economy is hurt in recent past years. Due to many reasons like Demonetization, GST implementation which is very new. The local businessman does there work in limited sources and with a hugely competitive market.
Recession affects Indian Housing Market
Indian Housing Market got 93% Drop which is $238 million, in Private Equity Investments till the year May 2020. The drop is largely affected by the Covid-19 pandemic. Covid19 impacted investor sentiments and the slowdown of the Indian economy in 2020.
In the year 2020 businesses seen a drop of 80 percent concluded in the first five months. This is compared with the same period of last year. Steep fall growth is seen in the domestic economy. And specifically the real estate sector. It will keep investors away from real estate investments.
In Indian Real estate during recent years P.E. investments are destroyed badly. Reasons are liquidation of sovereign wealth funds and pension funds effect by recession and shortage of money market.
How Recession hits Indian business in 2020?
This Year there were no deals negotiations in retail space. Due to COVID -19 and Business shutdown during lockdown mostly in India ‘power Majeure’ provision as per agreement activated and requesting of exempt the rent amount of rent periods.
Even after facilitating of lockdown. Due to increasing in COVID-19 patients. Shut down business spaces like shopping centers and spending on fundamental merchandise because of salary cuts may keep retail shopping malls zero footfalls. The situation is not seen in any recovery shortly.
The quarter from April to June 2020 India will suffer 25 percent contraction in GDP growth. About 10% of GDP in real terms has erased from the Indian economy. From 72 years of Independence, India hurt badly as seen a recession only thrice as in 1958, 1966, and 1980. The Covid-19 lockdown, first imposed on March 25 and extended thrice till May 31, has curtailed economic activity severely.
Services such as education and travel and tourism among others could continue to see a big hit in the year 2020. Jobs and incomes will see heavy losses as these sectors are large employers. It also saw economic activity in states with high coronavirus cases as restrictions could continue longer.
I hope for the best as the year has 3 more quarters to go in the financial year 2020-21. Please comment on what’s your opinion and what are the precautions measure we take to get off this situation.
I try to give you the results in my next article. please comment on how many you want.